BLBG: Company Bond Sales Stall in Europe as Credit Markets Freeze Up
By Shelley Smith
Oct. 10 (Bloomberg) -- Non-financial corporates bond sales stalled in Europe for a fourth week on investor concern the worldwide economy is headed for a recession.
``There has been no supply this week, which is no surprise given the huge risk aversion and de-risking taking place,'' said Suki Mann, a credit strategist in London at Societe Generale SA, France's second-biggest bank. ``Credit remains unwanted with few looking even tentatively to get involved.''
Financial companies, government agencies and supranationals sold 1.9 billion euros ($2.6 billion) of bonds this week, up from 875 million euros in the previous period. There were no new issues by non-financial corporates. This week's total sales were 85 percent below the weekly average of 13.2 billion euros over the past 12 months, according to data compiled by Bloomberg.
Corporate bond prices fell to the lowest in at least 10 years today, according to the Markit Iboxx European Corporates Index, as lenders hoarded cash on concern the deepening credit crisis will prompt more bank failures. Money-market rates soared to records even as countries around the world started emergency- rescue packages and cut interest rates.
OeBB Holding AG, Austria's state-owned railroad company, this week sold 1 billion euros of three-year bonds priced to yield 16 basis points less than the benchmark mid-swap rate, Bloomberg data show. OeBB last issued bonds in December, when it sold 50 million euros of 30-year notes.
NRW.Bank, the municipal lender for the German state of North Rhine Westphalia, raised 500 million euros by selling eight-year bonds. Tesco Plc, the largest U.K. retailer, increased its 5 percent bonds due in 2023 by 100 million pounds ($169 million), Bloomberg data show.
Extra Yield
Investors are demanding an average 3.55 percentage points more in yield to buy corporate bonds rather than government securities, up from 0.85 percentage point last year, according to indexes compiled by Merrill Lynch & Co.
The Markit Iboxx index of corporate bonds declined to 81.76 as of 10:04 a.m. in London today, from 83.21 on Oct. 6. The benchmark is made up of 1,059 bonds with a face value of 963 billion euros issued by financial and non-financial institutions including Barclays Bank Plc, Europe's biggest retailer Carrefour SA and GlaxoSmithKline Plc.
To contact the reporter on this story: Shelley Smith in London at ssmith118@bloomberg.net
